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IMM currencies end higher, euro jumps sharply

CHICAGO: Most IMM currency futures ended higher on Thursday as the June euro jumped sharply on likely short covering and settled near the peak, traders said.

The euro surged higher versus sterling and yen on likely short covering in the cash market as well, with a midafternoon US stock selloff pushing the nearby June contract to a high.

All IMM currency contracts ended higher on the session with the exception of June Mexican peso futures.

However, traders said the June euro bounce would likely be a short-term move rather than a change in the downtrend.

Buying accelerated as the June euro pierced $0.96000 and then Wednesday's pit high, traders said. The contract also filled a pit chart gap from $0.96280 to $0.96530.

Volume was steady on the rally, which stopped at $0.96680, just above Wednesday's overall high, in the morning. The contract hit $0.96750 in the last hour as US stocks sank.

"There was some good buying this morning in the euro that triggered short-covering, but the market attitude has not changed against the euro," said Margaret Kudarauskas, senior currency analyst at IFR/Thomson Financial.

The market seems to expect euro/dollar and euro/yen to head lower next week with the risk too great on the downside and not enough fear of Bank of Japan intervention, Kudarauskas said. The Bank of Japan may intervene, but at lower levels.

As long as euro/dollar remains below $0.9640, the currency is likely to move toward $0.9515 in the short term and then $0.9445, she said. Euro/yen will likely head back lower as long as it holds 101.80, with a target of 99.10.

The June euro was due for a bounce after sliding to a contract low at $0.95300 on Wednesday, traders said.

"I don't think there is much worry about the trend (lower) ending," one currency futures trader said. "It would have to get back through par for that."

The euro bounce also tugged June Swiss francs to a daily high at $0.6086, while June yen erased moderate gains.

The June euro gyrated after the European Central Bank held rates steady, as expected, and ECB President Wim Duisenberg said there was little more the bank could do for the currency.

Duisenberg said ECB monetary policy remains very accommodative and added that the US economy may continue to grow somewhat faster than the euro zone economy.

Expectations for a strong Bank of Japan "tankan" business sentiment report next week supported June yen, traders said. Gains were capped by concerns that the Japanese central bank would intervene if dollar/yen and euro/yen broke key levels.

The $0.009715 mid-March high remained a June yen target.

There is some expectation that Japan's next fiscal year may be different from the last several years and money may be attracted to Japanese technology shares, Kudarauskas said.

June sterling hit $1.5986 late and has resistance at $1.6002. Moderate buying pushed June Canadian dollars to $0.6891.

At settlement, June yen was up $0.000003 at $0.009606, euros up $0.01020 at $0.96620, Swiss francs up $0.0066 at $0.6077, sterling up $0.0006 at $1.5968, Canadian dollars up $0.0013 at $0.6889, Australian dollars up $0.0013 at $0.6132 and the Mexican peso off $0.000325 at $0.105500. -Reuters